Stock market participants are reassessing how they trade after investors rallied on social media platforms such as Reddit to kiss deep hedge money in stunning fashion this week on Wall Street.
“Retail traders are likely to continue to be a force to be reckoned with, which will have a lasting impact on institutional investors’ business models, ”said Maneesh Deshpande, head of equity derivatives strategy at Barclays, adding to the constant short press of some of their favorites. stocks were a “wake-up call” for Wall Street.
These risks were clarified after hedge funds like Melvin Capital were sacked from their short positions to buy back shares, gaining a huge advantage for stocks like AMC EntertainmentAMC and Gamespot. GME
On the other hand, retail investors who have properly managed stocks where vulnerable retail investors have reaped huge benefits.
A stock portfolio with a major shortcut called Reddit went up 150% in the past two months, according to data from Wolfe Research.
See: GameStop frenzy puts cleanhouses in focus as investors measure systemic risk fears
Some money managers are already scrambling to expect retailers to sell the next targets on platforms such as Reddit and Discord.
The Financial Times reported that hedge funds were looking at activity called other data tracking activity on Reddit to get ahead of day traders.
In fact, Yin Luo, size strategist and vice chairman of Wolfe Research, said his company came to a machine by using natural language processing to crush large volumes of text on subreddit forum wallstreetbets and evaluate what the stocks targeted by retail traders.
He then found out how much of those conversations on Reddit turned into buying and selling stock through Robinhood and other brokers catering to retail traders.
Thus investors using the tools could mitigate the risk associated with holding short positions, and learn when a stampede of retail traders would arrive and tying up short company shares, Yin said.
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